Electric Vehicle Disruption – Are We Ready for the Transition?

electric vehicle

To combat pollution and to reduce the import of crude oil, the government is pushing electric vehicles in India. The Modi government is targeting to make every Indian car electric by 2030 – (3W by 2023, 2W by 2025 and 4W by 2030). Globally and in India, Electric Vehicle technology is at a very nascent stage and is expected to evolve in the coming years.

The Economic Survey 2019 pointed out that the current market share of electric cars is only 0.06% in comparison to 2% in China and 39% in Norway.

Government’s Efforts to Push Electric Vehicle Demand
  • In the Union Budget 2020, the government announced tax deduction of up to Rs 1.5 lakh on interest paid on loans taken between April 1, 2019 and March 31, 2023 for purchase of electric vehicle
  • Lowering of the GST rate from 12% to 5% (28% GST is applicable on Internal Combustion Engine (ICE))
  • On electric vehicle chargers, the tax rate has been reduced from 18% to 5%
  • Phase-II of FAME (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India) Scheme, with an outlay of Rs. 10,000 Cr. for a period of 3 years
  • Last year, the tax on lithium-ion batteries used by EVs was reduced from 28% to 18%
  • The government has de-licensed public charging stations business for electric vehicles enabling individuals to extend such facilities, but at a regulated tariff
Challenges in Electric Vehicle Space
  • Battery makes up 50% of the total cost of the vehicle as compared to internal combustion engine vehicle, which makes up 15-17% of the cost of the vehicle
  • Expensive Affair – Maruti’s hatchback Wagon-R’s electric variant will cost up to Rs 12 lakh as compared to the ICE variant costs Rs 4.2-5.7 lakh
  • Limited Charging Infrastructure appears to be a ‘major obstruction’ to the increased adoption of EVs – Presently, there are only 150 charging stations in India.
  • Limited, inconsistent power/electricity
Are Companies Ready for the Electric Vehicle Disruption?

Companies operating across sectors are exploring opportunities in this space. Companies such as Tata Motors, Maruti Suzuki and Hyundai Motors are all readying their EV models for a 2020 launch. New entrants like MG Motors and Kia Motors are also exploring EV launches.

Initiatives taken by some of the companies to take advantage from the electric vehicle disruption:

  • Vakrangee aims to set up 75,000 EV charging infrastructure facilities across India by FY22
  • State-run companies like NTPC, GAIL India, Indian Oil Corp and Power Grid Corp have been exploring diversification into electric vehicle charging infrastructure business.
  • Tata Power plans to install 500 Electric Vehicle (EV) charging outlets across five cities over the next one year
  • Tata Chemicals will soon be entering the lithium-ion battery business, where the company plans to manufacture cell manufacturing, battery recycling, and battery production. Tata Chemical has already signed agreements with CSIR-CECRI, Karaikudi, the ISRO and C-MET.
  • Hero Motocorp has made a strategic investment (32.31%) in the electric two-wheeler manufacturer Ather Energy, based out of Bengaluru.
  • Greaves Cotton – Manufacturer of diesel engines, generators and pump sets, has increased its stake in Coimbatore-based electric vehicle manufacturer Ampere Vehicles from 67.34% to 81.23% by investing an additional amount of 38.49 Cr.

Electric Vehicle is a new technology and it will take time for EVs to catch on, especially when there is an overall slowdown in the automobile industry. The companies across sectors are doing a lot for the electric vehicle ecosystem, but Is India’s infrastructure ready to handle electric vehicles on the road?

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.